Although adjustable-rate mortgages reduce the adverse impact of ____ interest rates, they also reduce the favorable impact of ____ interest rates.

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Adjustable-rate mortgages typically have lower initial interest rates than fixed-rate mortgages, so they reduce the adverse impact of rising interest rates on homeowners' monthly mortgage payments. However, if interest rates decline, so will the monthly payment on a fixed-rate mortgage, but not necessarily on an adjustable-rate mortgage. Therefore, adjustable-rate mortgages also reduce the favorable impact of declining interest rates. Choice C is the only option that acknowledges both the positive and negative impacts of adjustable-rate mortgages on rising and declining interest rates.

Although Adjustable-Rate Mortgages Reduce the Adverse Impact of ____ Interest